MARKET SAVVY : Savvy Confidential: A Briefing for Investors : NYSE Board Wants IPO, but Not This Year

NEW YORK —  If you were hoping for a few shares in the New York Stock Exchange to go with your turkey and cranberry sauce, sorry, not this Thanksgiving.

NYSE directors Thursday voted to pursue the historic conversion of the Big Board into a publicly traded company, but they abandoned Chairman Richard Grasso’s idea of getting the deal done by Thanksgiving, instead pointing toward an initial public offering sometime next year.

Between now and then, the board’s 12 public members--those from outside the securities industry--will be asked to develop a strategic business plan for how the NYSE would operate as a public, for-profit entity.

Meanwhile, Grasso and his management team will try to work out a framework for the exchange’s self-regulatory apparatus that will satisfy the Securities and Exchange Commission.

SEC Chairman Arthur Levitt’s concerns about how to safeguard the independence of the policing function after an IPO are thought to have been a key reason that the NYSE board decided to slow the pace of the IPO effort.

Levitt, reacting to the board’s vote, said he looks forward to “a continued constructive dialogue with the NYSE,” adding, “We share a common interest in ensuring that any future self-regulatory structure is consistent with the protection of investors and the maintenance of fair and orderly markets.”

The Big Board directors voted after examining an analysis by Merrill Lynch of the issues involved in going public. The report, which Merrill prepared on a pro bono basis, will not be made public, Grasso said. It will be “a very important tool” to guide the NYSE’s public directors in their task of developing the business plan, he said.

The public directors include Stephen M. Case, chairman of America Online Inc.; Gerald Levin, chairman of Time Warner Inc.; H. Carl McCall, comptroller of the state of New York; Leon Panetta, President Clinton’s former chief of staff; and Linda J. Wachner, chairwoman of Warnaco Group Inc.

Merrill supplied the NYSE with “a bandwidth of variables” concerning what it might be worth as a public company, but Grasso refused to discuss a dollar figure or give a range. Because the value would be strongly influenced by the timing of the deal, he said, it was pointless to provide an estimate with an IPO many months away.

The most recent sale price for a seat on the exchange was $2.65 million. One seat holder noted Thursday that the current asking price for a seat is $4 million, perhaps indicating the kind of premium that owners would expect in a public offering.

Using that range of $2.65 million to $4 million per seat as a guideline, the total value of the seats, and therefore the NYSE’s potential market value, could be $3.62 billion to $5.46 billion.